SmartStream
Pushing the button on cash and liquidity
As we emerge from the pressures of the pandemic, we enter a new era of rising interest rates – and banks need to respond if they want to stay successful. Peter Dehaan, global head, business development for cash and liquidity management at SmartStream, tells Jim Banks about the opportunity banks have to profi t from more effi cient cash management processes.
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Interest rates have risen sharply in the UK in 2022, changing the fi nancial landscape once again.
n the not-too-distant past, the world was talking about how to manage in a zero-interest rate environment. Though familiar in Japan, where interest rates first hit zero in 1999, other major economies were still relatively new to the concept as recently as 2020. Stable investments would yield little return, so there was greater risk to capital from chasing higher yields. How quickly times have changed.
Now that inflation is the word on every economist’s lips, followed closely by recession, central banks are raising interest rates and everyone is adjusting to a new paradigm. In the UK, the bank rate hit 5.75% in late 2007, then plummeted to 0.5% in early 2009, then 0.1% in 2020. Since the start of 2022, it has jumped sharply to 3%, and is set to continue rising. In the US, the Federal Reserve is targeting a rate between 5.1 and 5.5% . With euro and sterling going to 4.5/5%.
“Post-pandemic, there has been a realisation that, having scrambled through, they can now move to a different environment and see what is out there,” says Peter Dehaan, global head, business development for SmartStream’s TLM Cash and Liquidity Management solution. “Those are the conversations we are having now. But there is a technology aspect they have to consider.”
“Now is a good time for banks to look at cash and liquidity management,” Dehaan continues. “In that area, banks needed discipline when interest rates were low, but now that we are in an era of higher rates it could cost them money if they don’t look to optimise efficiency.”
Time is money
Dehaan has seen the workings of big banks from the inside and fully understands their approach to cash and liquidity management. Having started out as a money broker before spending 16 years at Citibank, he moved to Lloyds in 2013 to help the organisation bring deposits onto its balance sheet. “SmartStream came to me to look after its cash and liquidity management solution, which is all about winning hearts and minds. That can take a long time, but I know a lot of treasurers and senior operations people. This company has been around for more than 40 years and it has a lot of clients and many close-knit relationships, so I am talking to not only Tier 1 and Tier 2 banks, but also challenger banks and all of them need help.
“Big banks often have antiquated and fractured infrastructure in many places, and in a low interest rate environment project inertia won through in many cases,” Dehaan adds. “But in an inflation- controlling world we are seeing rates go up all over the place, net interest margin is going through the roof, and banks are able to make money hand over fist. However, any latent liquidity costs them money.”
24 Future Banking /
www.nsbanking.com
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